Rudy Giuliani on Budget & Economy

Former Mayor of New York City; Republican Candidate for 2000 Senate (NY)

Get economy back on track based on growth principles

When I became mayor, the economy of New York was in very bad shape--tremendous deficits, ten-and-a-half percent unemployment, 300,000 jobs gone. We turned that around, cut unemployment by more than half, brought in 450,000 new jobs, and we cut
taxes by 17 percent. We did it based on growth principles, exactly the principles that are in the growth package that was introduced in Congress yesterday, which the Club for Growth said is the best stimulus for growth they’ve seen in a very long time.

Source: 2008 GOP debate in Boca Raton Florida
, Jan 24, 2008

Include permanent tax cuts in any economic stimulus package

Q: Do you support the president’s immediate principles for his economic stimulus package?

A: I haven’t seen the details of it. I prefer permanent tax reductions to one-shot rebates or one-shot deals.

Q:
But that would take a long time to see the impact of that, and there’s a crisis, apparently, right now.

A: That would be good, but I’d like to see a package put together where you get one for the other. The way I look at tax cuts is,
I put out 64 tax cuts when I was mayor of New York City; I got 23 of them. Some of them, I had to trade one for the other. So I’m not opposed, at all, to the president trading some of these, but
I’d like to see him get permanent ones as part of it. If he’s got to trade with the Democrats in order to give them some of the things they want, that’s OK, as long as he gets some of this permanent relief as well.

US less competitive if we overtax, over-regulate & overspend

Making clear that the investment taxes--you know, the capital gains tax, the dividend tax--the Bush tax cuts are made permanent, particularly with regard to those areas that are sensitive to investment in the US.

I would also immediately begin a
program to reduce government spending. And then I would accelerate this whole effort to look at regulations so that America doesn’t over regulate businesses and money out of the US.

Those three things have to be adjusted.
You can overtax, you can over regulate, and you can overspend to such an extent that you’re hurting yourself on a competitive basis. Those are the things that I think are the core of a sound fiscal policy.

If the government presents the picture of
immediately moving toward pro-growth policies, you have growth right away. By announcing strong pro-growth policies, you can affect that decision, and that brings more liquidity. It brings more money. It brings more investment into your economy.

Tax cut right now would provide stimulus and avoid recession

Q: Do you favor a short-term government stimulus package to avoid sliding into an economic recession?

A: Yeah, favor. That’s why I made the announcement that we should do tax cuts right now. I favor a program right now of doing three things:
Strategic tax cuts that stimulate the economy, like cutting the corporate tax from 35% to 25%, which would be an immediate boost in jobs and investment in the US.

Q: But even if you were president now and you put all of those in with the state of the
union later this month, those wouldn’t help in the short run. Those wouldn’t help for a couple of years. What about a short-term stimulus?

A: The kind of short-term stimulus you need is to present the realistic picture of an economy that’s going to
grow. And then the private sector and the investment from the private sector--the multiples of money that that would involve dwarfs anything that you’re talking about.

Retire 42% of federal employees in next decade, to save $20B

Q: Does our country’s financial situation creates a security risk?

A: I believe that it’s a major problem, and it’s one that hasn’t been addressed the way it should be over the course of the last 20 years. And there are three major things that we have
to do. First, we have to reduce government spending, and we have to be very disciplined about that. And we have to do it by imposing spending caps on the civilian agencies in governments--maybe 15%. We have to say that we’re not going to rehire half of
the civilian employees that come up for retirement. 42% are coming up over the course of the next 8 to 10 years. They should not be rehired. That would give us a $20 to $22 billion reduction. And then we have to reduce taxes.

Q: Yes or no, is the debt
a threat to our national security?

A: I wouldn’t call it national security. I would call it economic security. It’s very, very important. I think of Islamic terrorism as being national security. Economic security is also very important.

Restrain Congress’ spending; don’t ask people to sacrifice

Q: What sacrifices would you ask Americans to make to lower the country’s debt?

A: Well, I think the most important thing is the federal government has to restrain its spending.
The problem is not the American people. What we should be doing is restraining the amount of money that
Washington spends in a concerted way, with major reductions in civilian spending, using attrition, and leaving more money in the pockets of the American people.
The strength of America is not its central government; the strength of America are its people. Restrain the central government, give people more choice, more money to spend, we’re going to see our economy booming.

10% across-the-board cut; people can get services other ways

Q: You’ve said you’d cut non-military spending 10% across the board. What sort of sacrifices would that require from people who use those government services?

A: Well, that would require their trying to figure out other ways to do it. I mean, rather
than moving in the direction of more people on government medicine, I’d rather see us reduce the income tax burden, create an exemption for health care so people can buy their own health care. So that’s going to require they take a little bit more time,
take a little more ownership of their health care. Rather than relying on government as the nanny government, let’s rely on people to make choices about their health care. Let’s rely on, instead of 17 million people buying their own health insurance,
50, 60, 70 million. You’ll see the price come all the way down and you’ll see the quality come up. That’s an American solution. It’s a bold one, but it’s the kind of thing America has done in the past. We rely on our people, not on our government.

Goal of balancing budget, but no pledge

Q: Would you pledge to balance the budget if you were elected president?

A: Sure, I would make it a goal.

Q: But not a pledge.

A: I don’t do pledges. I didn’t do a pledge on taxes. I stated my intention was to lower taxes. I have a record of
lowering taxes. My intention would be to balance the budget. I have a record of eight balanced budgets in a city where we had some serious economic and financial difficulties at various times, and we figured out a way to balance the budget.

Fundamentals: low taxes; few regulations; control spending

Q: Is there any downside to this amazing bonanza in the hedge fund and the private equity firms?

A: The market is a wonderful thing. The free market is one of our greatest assets. With the free market, the sky’s the limit.
The reality is that what we have to do is look at the fundamentals. A president can’t be a economic forecaster. What are the fundamentals? Keep taxes low. Keep regulations moderate. Keep spending under control. That’s an area where we need a lot of help.

Source: 2007 Republican debate in Dearborn, Michigan
, Oct 9, 2007

Romney increased spending by 8%; I cut spending by 7%

Q: Your difference with Mayor Giuliani on tax cutting?

ROMNEY: Well, we both agree with the need to cut taxes and have fought to do so. [But] Mayor Giuliani fought to keep the commuter tax, which was a very substantial tax, an almost
$400 tax on commuters coming into New York.

GIULIANI: The difference is that under Governor Romney, spending went up in Massachusetts per capita by 8%; under me, spending went down by 7%. I brought taxes down by 17%.
Under him, taxes went up 11% per capita. I led, he lagged.

ROMNEY: It’s a nice line, but it’s baloney. Mayor, you got to check your facts. #1, I did not increase taxes in Massachusetts; I lowered taxes. #2, the
Club for Growth looked at our respective spending record. They said my spending grew 2.2% a year; yours grew 2.8% a year. But look, we’re both guys that are in favor of keeping spending down and keep taxes down. We’re not far apart on that.

FactCheck: Hillary never called free market “destructive”

Giuliani wrongly attributed a quote Hillary Clinton, and he got the quote wrong as well. Giuliani said Hillary “once said that the unfettered free market is the most destructive force in modern America.”

Clinton never said that. The quote is by Alan
Ehrenhalt, and Ehrenhalt didn’t call the free market “destructive” but used a softer term “disruptive.” As Clinton cited in “It Takes a Village”, Ehrenhalt said, “The unfettered free market has been the most radically disruptive force in American life in
the last generation, busting up neighborhoods.“

To be sure, Clinton agreed with that sentiment. But she also said in the same book, on the next page, that ”the economy is also creating millions of new jobs.“ And later she said the free market is ”the
driving force behind our prosperity.“

Giuliani misleads when he says Clinton called the free market ”destructive,“ when what she has really said is that it is both disruptive to neighborhoods and people’s lives, and a driving force behind prosperity.

FactCheck: 11% tax-burden decrease is correct but misleading

Giuliani was guilty of misusing statistics when he accused Romney of raising taxes significantly. Giuliani said, “You’ve got to control taxes. I brought taxes down by 17%. Under him, taxes went up 11% per capita. I led; he lagged.”

Hearing this, one
could be forgiven for thinking that Romney had raised tax rates substantially during his four-year term as governor. Not true--he tried to lower state income-tax rates 3 times but was stopped by the Democratic Legislature.

Giuliani calculates the
percentage change in the tax-burden figure, which itself is a percentage; 17% & 11% are correct. But journalists generally avoid using such figures because they are confusing & easily misunderstood.

Tax burdens, of course, are dependent on the general
state of the economy. The good times rolled for most of Giuliani’s tenure. Romney wasn’t so fortunate. Personal income grew 49% under Giuliani, 23% under Romney. So when Giuliani talks about leading and lagging, he might also mention a third “L”: luck.

I took over NYC in fiscal crisis;then reduced taxes 23 times

I’m not running on what I did on Sept. 11. I’m running on the fact that I was mayor of the largest city in the country, the third largest government in the country. I was tested in that position with crisis almost every day.

When I came into office,
I took over a city with a massive fiscal crisis. I took over a city with a massive crime crisis. We were on the front page of Time magazine as the rotting of the Big Apple. And I turned over a city that was the safest city in America, just about.
I turned over a city that where we had reduced taxes 23 times. I turned over a government that George Will said was the most conservative government of anyone in the last 50 years. And I turned over a city where people had hope that hadn’t had hope
before.

And before that, I was the third ranking official in the Justice Department. I’ve had a great deal of experience; I think it’s the kind of experience that helps to prepare you for president, if there’s any experience that does.

Establish accountability in Washington, like in NYC

Q: How do we avoid a repeat of the GOP loss in 2006 in 2008?

A: The thing that I would do different is I would establish accountability in Washington. Washington is a mess, and that’s one of the reasons Republicans lost. Republicans became Democrats.
I would establish programs like I did in New York City--FedStat programs to measure accountability. You get what you measure. If you don’t measure success, you have failure. And I turned around New York City; I can turn around Washington.

Source: 2007 GOP debate at Saint Anselm College
, Jun 3, 2007

Taught NYC how to use principles of fiscal conservatism

Q: You talk about that you cut taxes 23 times; that you reduced welfare rolls by 600,000 people. But independent budget reviews say that spending went up $9 billion during your time as mayor and that, in fact, there were 6,000 more city workers at the
end of your two terms than there were at the beginning. Question: Fiscal conservative?

A: Sure, big time. Compare that to other states and the federal government during that period of time, and it was about the lowest growth in government.
It was below inflation & the growth of the economy. It was about the only government that was able to accomplish that. I lowered taxes, because I lowered the growth of spending in ways nobody else had ever done compared to other states, other governments
And actually, the reduction in welfare was 640,000. And you have to see it in the context in which I did it. I did it in the context of a place that never did it before. I had to teach New York City how to use principles of fiscal conservatism.

1990s: Cut spending in 1st term but raised spending in 2nd

At the end of his first term, Giuliani legitimately claimed to have disciplined NYC’s wayward budget. He accomplished the rare feat of cutting spending in his first year, and it hardly budged for two years after that.

But in his second term his handlin
of city finances was far different. According to a city comptroller report, Giuliani increased city spending at three times the rate of inflation during those years.

In the end, Giuliani did what other mayors have done: he balanced budgets under
sometimes painful circumstances and used the slack to fund his immediate political priorities. For Giuliani, who planned to run for higher office as a crime-fighter and tax-cutter, that meant funding tax cuts and a larger police force.
Despite his rhetoric, Giuliani failed to take advantage of the booming 1990s economy to solve the city’s long-term budget problem--the “structural gap” in which expenses continually rose faster than revenues, creating recurring deficits year after year.

Under-estimate future revenue to force cost containment

On July 12, 2001, I gave my final presentation to the NY State Financial Control Board. I pegged revenues for 2001 at $40,640,000,000. For my next four years of estimates, I used:

2002: $39,698,000,000

2003: $39,713,000,000

2004: $40,976,000,000

2005: $42,228,000,000

Did I really think NYC would not match 2001’s revenue until 2004? Certainly not. But it was my policy to underestimate anticipated revenues because it forced those who worked for me to contain costs.
By assuming low revenues, I could argue against unnecessary expenditures and maintain a frugal culture, even during flush times.

Too often, organizations base their projections on best-case scenarios. A city will borrow substantially after a
healthy year only to find, when revenues sink, that it needs to ramp up taxes simply to cover its debt. Or a business will hire new staff and plush up its headquarters, even when its strong recent past cannot be relied on to continue.

Economic development requires maintenance

Economic development is not just building new things. Part of the art of economic development is preserving what you have. Sometimes the City has not done a good job of preserving what it has. Throughout the last century, we have not
consistently preserved our subways, our highways, and our bridges. In the last fifteen years, we have paid the price for that in the form of huge capital budgets and expenditures for the cost of finance in our capital budgets. We
pulled the money out of maintenance to deal with the financial crisis. That’s one of the big mistakes. We should learn from that mistake and not repeat it.

Source: State of City Address, New York City
, Jan 13, 2000

Fiscal responsibility turned $2B deficit into $2B surplus

NYC government used to be renowned for its heavy taxation, chronic mismanagement and anti-business philosophy. Between 1990 & 1993 this resulted in the loss of over 320,000 jobs and a $2 billion budget deficit. Under Rudy Giuliani’s leadership, the city
has embraced a philosophy of fiscal responsibility. Taxes have been reduced by $2.3 billion and at the same time the City has turned the $2 billion dollar deficit into a $2 billion budget surplus. As a result of this philosophical shift, businesses are
reinvesting in the City at a record rate. Over the past 5 years the City has gained more than 305,000 jobs, marking the highest rate of private sector job growth in the city history. In fact, Fortune magazine named NYC “the most improved North American
City for business.” The City’s renewed pro-business stance, tax incentives & crime reductions have allowed for new businesses to develop in areas of the city that had struggled in the past, as existing businesses have grown and prospered.

Source: RudyYes.com, “Proven Leadership” web site
, Dec 9, 1999

Record tourism based on revitalization

In 1998, the City had a record 34 million visitors, which continued a record setting 3-year trend. Last year, tourism contributed over $14 billion to NYC’s economy. The revitalization of Times Square has led to Broadway’s most successful
year to date. With the reduction of the Hotel Occupancy Tax, hotel business is booming. The City opened more than 8 brand new hotels, including the Renaissance Hotel in Downtown Brooklyn. This was the first new hotel built in Brooklyn in 50 years.

Source: RudyYes.com, “Proven Leadership” web site
, Dec 9, 1999

Entertainment revitalization contributes to economy

The City unveiled plans for Hudson River Studios, a new television & film complex, in SoHo. This project will help to expand our ever-growing television and film industry, which in turn contributes to both private sector job growth and the
City’s economy.

In 1998, NYC continued its record-breaking success in film & television. Both industries contributed a total of $2.57 billion to the City’s economy. The City has gained a reputation as the “Hollywood of the East.”

The Mayor reached an agreement with the NY Yankees to bring a Minor League affiliate to Staten Island. The Staten Island Yankees will open this year at the Staten Island College baseball field.

The City made plans to build the first golf course in 35 years. The new course will be located along the East River in the Bronx. The city will make all facilities accessible to the general public.